Looks like the Mumbai Real Estate prices will crash the same way as the Mumbai SENSEX crashed on Jan-21st-2008, wiping out half of the traders in Indian stock market.
HDIL bought a 10 acre plot for over Rs 2,000 mm from Bombay Oxygen Corporation Ltd. The property is located on LBS Marg in Mulund, Mumbai. Taking an FAR of 2 as a base case (inclusive of development rights loading), the developer will have to achieve an average monthly rental of Rs 47psf for sustaining a 19% PAT Margin (Project IRR of 23%).
In the MMRDA Auction, Starlight Systems (promoted by Ajay Piramal and Suntech Group) bagged a 7043 sq m residential plot (BUA of 14,100 sq m) in Bandra Kurla Complex for Rs 4960 mm (Rs 32,712 psf). Taking the built up area of 0.2 mm sq ft as per the bidding details, the developer will have to achieve an average selling price of Rs 50,000 psf for sustaining a 19% project IRR. This is at a significant premium to prevailing residential capital values of Rs 20,000-30,000 psf and is likely to be the WORST REal Estate Deal.
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